CenturyTel to Buy Embarq

In the latest move toward consolidation in the industry, two rural telcos today announced plans to combine. CenturyTel Inc. (CTL) expects to buy larger telco Embarq Corp. (EQ) in a $5.82 billion stock deal.

The transaction is expected to generate synergies of approximately $400 million annually within the first three years of operation. Key drivers of these synergies include reduction of corporate overhead, elimination of duplicate functions, enhanced revenue opportunities and increased operational efficiencies through the adoption of best practices and capabilities from each company.

"We expect that bringing EMBARQ and CenturyTel together will accelerate both companies' strategic plans, diversify our revenues and provide us with the expanded networks, expertise and financial resources to build long-term value for shareholders,” said Glen F. Post III, CenturyTel's chairman and CEO.

The two companies operate in 33 states with approximately 8 million access lines and 2 million broadband customers. The combined company is expected to have pro forma revenue in excess of $8.8 billion, pro forma EBITDA of approximately $4.2 billion, pro forma leverage of 2.1 times EBITDA and pro forma free cash flow of approximately $1.8 billion, based on anticipated full run-rate synergies and operating results for the 12 months ended Sept. 30, 2008.

The combined company's senior leadership team will be comprised of executives from both CenturyTel and EMBARQ. Glen Post will be CEO, Tom Gerke will assume the role of executive vice-chairman of the board, Karen Puckett will be COO and Stewart Ewing will serve as CFO. William A. Owens, currently non-executive chairman of the EMBARQ board of directors, will be the non-executive chairman of the combined company, and Harvey Perry will continue as non-executive vice-chairman.

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